Commerzbank’s Hauke Siemßen highlights that hawkish ECB commentary and the Iran-related energy shock have pushed money markets to discount three full ECB rate hikes by year-end and an 80% probability of a first move in April. Upcoming ECB wage data and the Survey of Monetary Analysts could refine expectations, but growth indicators may be sidelined for now.

Hawkish pricing builds into April meeting

"After the rather hawkish ECB sources and official remarks, forwards are now pricing three full rate hikes until year-end and an 80% chance for the first hike in April. At the April meeting, only few data pointers for March will be available, which would render a potential hike a risk management exercise and a sign of commitment to stay ahead of the inflation-curve. More hawkish leaning council members like Nagel seem in favour of an April hike, while centrists council members should ultimately tip the balance. Remarks from this week's ECB Watchers Conference may shed more light on the different perspectives within the ECB."

"On the data side, today's ECB wage tracker and the results of the Survey of Monetary Analysts (SMA) for March will be made available. As the SMA's cut-off date was on 6 March, expectations for longer-term inflation and the ECB policy reaction may become intriguing. The PMIs on Tuesday and Germany's ifo may receive less attention than usual in the current environment, and with markets firmly focused on the fallout of the energy price rally."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)